Over the past few months I’ve been rewriting the handbook that accompanies the 21T Value Grid, and despite its fundamental acknowledgement that decisions are at least as emotional as they are rational, the process revealed some new insights which make this truer than ever.

Bounded Rationality

Purely logical decisions must, by definition, be solely based on objective, accurate, unbiased and complete information. But it is rarely (if ever) the case that we have access to “all” of the information, including the information we know that we don’t have and the information we don’t know that we don’t have (the knowns/unknowns conundrum). In any case, often we have too much information, the volume, variety, relevance and complexity of which is not necessarily helpful in making the “best” decisions, however “best” might be defined. In the end, the best we can do is to make a reasonably rational decision based on the information and time available – in other words, even our most logical, rational, well-considered decisions are imperfect. On that premise, bounded rationality is the mechanism by which decisions can be made at all, and the reason why, irrespective of what is believed to be incontrovertibly true, courts make “judgments” and doctors give “opinions”. Our bounded rationality has served us well, as it continues to serve every other complex living creature.

As an example, Sir William Thompson, 1st Baron Kelvin, the 19th century mathematical physicist famous for predicting absolute zero temperature (-273 C / -459 F) was a leading electric telegraph engineer and inventor who also contributed to the study of atomic behaviour and the laws of thermodynamics – clearly no fool. However, despite his immense knowledge, deductive prowess and self-professed awareness of the limitations of his own knowledge, he wasn’t always correct, or even close to it. He has been attributed as saying “X-rays will prove to be a hoax” (before changing his view later), “No balloon and no aeroplane will ever be practically successful”, “Radio has no future”, and that the world’s oxygen supply will run out. As usual, his intellect was keen and his reasoning solid – his problem was perhaps not as much that he did not have all the information as it was that he did not know that he did not have all of the information. It might also be that, when making these statements, that he did not differentiate well enough between his knowledge and his (emotionally-biased) opinion – but who of us does?

On the unlikely assumption that all of the information is known and available, our brains need to simplify complexity in order to manage it. This is why stereotypes, brands, impressions and other methods of making quick categorisations are so helpful for us – despite them being incomplete or incorrect. Simplifications allow us to make sense of things quickly, preventing life from becoming so confused and stressful that we would struggle to function. This is an inherited survival trait – imagine an ancestor in the jungle not being able to instantly categorise surroundings as safe or dangerous. The ability to perceive a plant as safer than an animal, and a bigger animal as more dangerous than a small one, needed to be instantaneous. The caveman who made snap judgments and reacted unthinkingly, even if wrong at times, survived, whereas the caveman who put off his decision until he had analysed all the facts was a sabre-toothed tiger’s lunch.

Here is an example of bounded rationality in the simplest of decisions:

Imagine you have to replace two tyres on your car. You call two retailers, quote them the brand and specifications, and ask them for a quote, including fitting. If both quote the same price, and you’ve never used either before, and neither were more convenient than the other, which do you choose? There’s every chance it’d be on the tone and helpfulness of the person who answered the phone which, objectively speaking, has nothing to do with the outcome you require. The logical, rational decision is now a completely intuitive one.

Let’s assume that, as a highly rational person, you decided to do some research based on user reviews, finding that one rated at 4 stars and the other 3. Does that make the one with the higher rating superior, or does it only provide you with subjective feedback from people you don’t know, with priorities and values you aren’t aware of, and who may or may not have motivations other than providing a public service? Do you look at the way the reviews are written and judge their relevance based on that – as intuitive as that becomes?

Let’s assume you are ultra-diligent and visited each business to inspect the appearance and perceived quality of their premises, equipment and work, and that the 4 star option, according to your clipboard and imperfect checklist, again rated more highly. Is that an absolute guarantee that they will do a better job on the 2 tyres that go onto your car? That your tyres won’t be fitted by the new apprentice who had a late night and whose mate wrote three fake positive reviews about him? Is it a guarantee that the tyres came from a batch that wasn’t inferior to the tyres at the other retailer? Yes, it is reasonable to say you are likely to have a better result at one compared to the other, but it is not guaranteed because it is impossible to know all of the information. The point where evidence runs out and we have to make a judgement is the line where our rationality is bounded.

Even the best controlled decisions are not entirely logical – imagine two competitors tendering for exactly the same work, specified so highly in technical diagrams and specifications that there is no room for different interpretations (notwithstanding that there will be). Imagine that influential figures within one of the competitors enjoy trusting relationships with the decision maker, whereas managers of the other are unfamiliar and perhaps made a poor first impression. What if another competitor, who in the past upset the decision maker, but still did a good job, were also to tender? All other things being equal, including risk profile, how much cheaper does the out-of-town or poor-experience competitor need to be? 1% 5% 10% More? Adding more decision makers does not necessarily reverse this – in fact, if they all have the same emotional preference, it becomes easier to discount objective facts through the influence of social conformity in the form of group-think. This preference for the familiar (or socially favourable) isn’t logical, but intuitively we know it’s the one we would take as it reduces perceived risk. Not necessarily objective risk, but perceived risk to ourselves.

Neurobiology and Intuition

In evolutionary terms, the need for immediate, survival-based actions is why our amygdala is more powerful than our frontal cortex – as with any animal, reacting was more important for survival than thinking, with immediate effects on pulse, breathing, blood flow and other bodily functions. It’s why we jump when we get a fright before we can figure out whether there’s anything to worry about. Today, it seems that thinking is more useful than reacting, and that might be correct if all the information exists, if we can get hold of it and if we have all the time in the world to absorb, prioritise, process and apply it. It also might be correct if our brains were designed differently – but they’re not. Our amygdala is not only the emotional centre of our brain, but is also involved in rational thought and decision making. Neurobiologically it is not possible for us to entirely separate our brain’s logical and emotional functionality. And, because of limits to rationality, that’s a good thing.

Instead of being primarily based on logic, even in non-urgent decision making our brains are biased toward reactions and intuition, both heavily influenced by emotions, themselves shaped by our personal histories (physical and experiential) along with current external and internal stimuli. Intuition is how we cope with bounded rationality, drawing upon the emotionally anchored learning from historical events and experiences in conjunction with the strong and subtle ones present at any given time and context. Intuition allows us to draw on information that might be in other respects unrelated and to combine it with our logical, social and personal understandings to shape decisions that pure logic is simply unable to do – not that we necessarily know that we are doing it.

Fans of big data will say that they can analyse information and make accurate predictions based on that information alone, but again they are limited by the quality and completeness of the data and their predictions do not apply at a micro level – for example, taken absolutely, big data predicts that thousands of people will have a serious accident today, but it won’t be you or I. That’s no basis for an absolute decision on whether it’s safe for us to drive to the store today or not. Perhaps the challenge for big data is not only that it is incomplete, but that, to be useful, it has to be interpreted, considered and acted upon, reintroducing the roles of intuition and judgement.

Intuition also allows us to include influences on decisions that might be hard to quantify, verbalise or even understand, including our estimations of people. Intuition is also a decision stopper – despite evidence, how often might you make happily make, and be committed to, a decision that, for no explainable reason, doesn’t feel right? A proof-reader for this article said that although it makes sense to her, she doesn’t agree with it because she feels that her choices are always rational. And while it is easy to discount the concept of feelings and rationality (surely a purely logical choice is rational, irrespective of how we feel about it), her point is well made – her intuition needs to match her logical reasoning for her to believe this article, or any choice she makes, is useful to her. More than that, as she demonstrated, we are likely to believe our feelings ahead of rational argument, particularly when they relate to protection of our sense of self.

We don’t choose who we trust, whether we feel safe or even who we marry based on logic, and our ancestors did not investigate whether the lion nearby was a threat – but we need to be good at making those decisions, some of them instantly. Our brains understand this basic survival need to quickly categorise, prioritise and make judgments based on available information and intuition, some of which can be explained and some of which can’t. This isn’t to say that we should simply make emotional choices and ignore logic or data, as that is a nonsense – there is a real world out there that can help us or hurt us, and we need to be as knowledgeable as we practically can be when making decisions. But instead of assuming we make logical, rational decisions, we are best to accept that all of our decisions, due to time and our ability to absorb, prioritise, understand, process and usefully apply information must, in every case are heavily influenced by, if not based on, simplifications, stereotypes, emotional learnings, impressions, feelings and other unacknowledged influences. In doing so, we might become a little more flexible in how tightly we hold on to our truths, and how open we are to new information, alternative views and collaborative potential.

A problem with intuition (perhaps intuition should also be described as bounded) is that it looks to similar experiences as a reference point, with the most emotionally influential ones (usually traumatic) taking precedence – the dominant phenomenon behind PTSD. Again, this is a survival mechanism, as it is important that dangerous events and circumstances are imprinted on our brains so that we instantly recognise the potential of them recurring in order to act in self-preservation. A challenge can be when the reference point subconsciously chosen is unhelpful, or too much weight is placed on it, leading to incorrect decisions that feel absolutely right but are disastrously not. There is also a challenge where no emotional (personal or social) memory or other reference point exists, in which case the amygdala generally defaults to being wary of the unknown and so takes a defensive, cautious stance – part of its risk-averse evolutionary survival mechanism.

In quantifying the amygdala’s bias toward safety, there is a natural inclination for humans to over-estimate losses by a factor of 2.25 compared to gains, and an inability to weigh probability accurately, placing too much emphasis on the unlikely and not enough on the likely. For simplicity we also lose a sense of proportion when numbers become large. The difference between a company making 3.1 or 3.2 billion dollars profit is not much – except that it’s one hundred million dollars.

Apart from these cognitive distortions, humans share a need for control, coherence and consistency; for attachment, belonging and place; for pleasure; and for self-enhancement. These basic human psychological and sociological needs do not come and go – they are, to varying degrees, omnipresent, and act as influences on not only the decisions we make, but why we make them, usually without us being aware of their presence. In particular, the sociological aspects of those needs open us up to letting go of our own intuitions in favour of being persuaded by someone who appears more confident or powerful – a socially-based survival mechanism that in modern settings often leads to poor decisions.

Reasoning is also selectively lazy. Research supports what we already knew to be true – once we take a position on a subject we prefer to stay with it, over-emphasising information that supports it and discounting information that works against it. Without even going as far as religious or political extremism, anyone who has been on a school debating team has experienced this – no matter what side of an argument one is allocated, once committed competitively there is a tendency to believe one’s own position is superior. There is also the phenomenon of sunk costs, where a commitment to change, even if it is known that a different choice, despite existing investments, would produce a better outcome, is difficult because of what would be lost rather than what might be gained – emotionally, socially and financially.

Notwithstanding these and other weaknesses that prejudice the ability of our emotional needs and intuition to influence “good” decision making, neuro-research has shown that even basic, everyday decisions that are based on logic alone are usually not as confident, quick or good as those made by combining rationality and intuition. Considering the design of our brain and the evolution of our species, that’s hardly surprising.

Reality versus perception: How our brain copes

(This part is a bit more conceptual, so if you’re short of time and have the gist of things already, there’s no need to continue. But if you like to think about things at a deeper level, read on…)

A problem for absolute reality, and by inference how we think about logic, is that we don’t know what it is – and if we did it wouldn’t help. For example, look at the pictures below:

What do you see? Perhaps a square followed by a cube (is the top of the cube in front of the bottom, or the bottom ahead of the top?), and then a circle followed by an oval, or perhaps a circle lying down, followed by a cylinder. Those options certainly seem logical, and, as each shape represents something that might have meaning for us, there is undoubted benefit in seeing them that way.

Yet, as a purely logical appraisal, those descriptions are not factually incorrect. The shapes we see are the simplifications that our minds construct from the available information as quickly, simply and usefully as possible. We are not looking at 2 and 3 dimensional shapes. If you change the position of your eyes in relation to the screen, you will not that none of them are 3D – how can they be? The screen is flat, and they do not recede or project from the surface of the screen, so they have no depth – therefore all are 2D, irrespective of the sense we make of them. But even that is incorrect.

What we’re actually looking at is a bunch of pixels that form patterns that we can relate to. But they’re not even pixels, they’re molecules that are stimulated by a flow of electrical current so as to produce light, a form of energy which we are able to detect in differing shades and intensity. Beyond that they’re trillions of quarks but mostly a vacuum – and beyond that who knows? This is the objective reality – but as it is of no practical use to us right now, we do not bother with it. In evolutionary terms, there was never an advantage in us being able to perceive this reality, so we are blind to it, despite it being more real than the visual patterns we see as words, colours and shapes.

Taken further, the images that our eyes pass to our brains are processed in ways that make sense to us, as are the sounds, smells and other senses we use every day. What does a rose smell like? The only answer is that a rose smells like what we each, individually, think it smells like. When I see a colour or hear a sound, even if we both have “perfect” vision and hearing, do you see the same colour or hear the same sound in the same way? Not only is it likely that our perceptions of those stimuli are different, it’s almost inevitable.

In these ways, not only do we all perceive absolute reality differently, we construct it differently. Beyond base subatomic particles, everything else is the reality we construct from our environments, prioritised and limited by our ability to process information in ways that are useful for our survival. And that’s the point – facts, information, evidence and other illusions of control and objectivity are only useful in how we understand and do about them, not in what they really might be. In evolutionary terms, it is not important that I understand what I am looking at, but it is vital that I understand if and how it might affect my ability to survive and reproduce. Today, it is not important what this computer screen is made of or how it works – it only matters that I can use the images it creates to guide the actions of my fingers in a way that I perceive to be most useful in helping you to understand the meaning of my message. That is the extent of the logic that is useful – and it is only useful in how you perceive my words and what they mean to you, emotionally and logically, and then they are only useful to you if, and in how, you choose to apply them.

Not only does it turn out that, as we all knew, we don’t make entirely rational decisions, it turns out that, due to the evolution’s influence on the design of our brain, we can’t. And, from an entirely rational perspective, that’s a good thing.

Notes:

1. The intent of this article is to discuss our inability to make perfectly informed, purely logical decisions, with the intent of helping us to accept the necessary imperfections in our decisions and beliefs, hold on to our truths lightly, remain open to new information and more easily forgive ourselves, and others, for mistakes.

2. Although other parts of the brain are involved in decision making at various levels of consciousness, processing and deliberation, and that people may describe or attribute intuition in varying personal and culturally-influenced ways, the concepts of bounded rationality, emotional needs, bias, simplification, judgement and imperfection have been viewed as the most useful for the intentions of this article.

Resources

New Castle News, 9 October, 1901, p3.

Thompson, S. P., The Life of William Thomson, Baron Kelvin of Largs, Volume 2, 1910. MacMillan, London